There are many people who wonder if getting a reverse mortgage is right for them. In fact, it can be a great option to use the equity built up in your home to get a loan that you can use as needed. If you are considering a reverse mortgage you probably have some concerns and questions. Here are some things you should know.
How Do You Apply For A Reverse Mortgage?
First, it is important to consider how you will apply. First, you will submit an application with the bank or credit union that you are considering using. Much like getting a regular mortgage you will be asked to prove income, go through the process of proving your credit, and showing any other pertinent documents to prove that you can handle the loan.
Then after you have proven that you can afford the loan, the bank or credit union will send out an appraiser. The reason for this is that they want to see how much the house is currently worth. That will tell them how much they are willing to loan you. Thus, if you have a loan out the house for $120,000 and the house appraises for $200,000, then you currently have $80,000 equity in the home. This doesn't mean that they will give you a loan for $80,000 it simply means that you could potentially loan up to that amount. Usually they will give you a reasonable amount within the equity that you have.
What Should You Use The Loan For?
Second, it is important to consider what you should use the loan for. There are some things that are worth using a home equity loan for and other things that you shouldn't. First, it is a good investment to use a home equity loan for home improvement. If you want to finish the basement, or fix the roof, it would be a good choice. This is because it improves the value of the home, so when you sell you are likely to get that money back. You can also use the loan for retirement. Many people use a reverse mortgage to help fund their retirement, since their home is generally their biggest investment. Just know what when you eventually sell the house, you will have nothing left over in equity.
As you can see there is a lot to consider when getting a home equity loan. If you are considering getting what talk to a credit union or bank about your options.